By Archana Chaudhary and Vrishti Beniwal
India’s central bank should step up its fight to curb turbulence in the rupee and ensure the currency doesn’t swing wildly, a senior adviser to Prime Minister Narendra Modi said.
“We need a better exchange management policy, a sharper response and a lower time to respond, ” Rajiv Kumar, vice chairman of the government think-tank NITI Aayog, said in an interview on Wednesday. “RBI should be acting more smartly to smoothen the volatility rather than see this yo-yo-like movement in the rupee value.”
India has been swept up in an emerging-market rout triggered by rising U.S. interest rates and a stronger dollar. With investors pulling money out of stocks and bonds, the rupee has slumped 6 percent against the dollar this year, the worst performer among a basket of Asian currencies tracked by Bloomberg News.
The Reserve Bank of India’s reserves slid $11 billion in the five weeks through May 18, partly to halt the currency’s drop, data from the central bank show. An email sent to the RBI spokesman remained unanswered.
Oil Price Rise
Adding to the South Asian nation woes are rising crude oil prices. Every $10 rise pushes up the inflation rate by 30-40 basis points and hurts economic growth by about 15 basis points, according to Nomura Holdings Inc.
The Reserve Bank of India needs to keep interest rates unchanged next week to boost growth and lend a helping hand to manufacturers who are struggling to access bank loans, Kumar said. The inability of banks to extend credit amid mounting bad loans is a risk to growth this year, he added.
RBI Governor Urjit Patel has kept rates unchanged since August and cut inflation projections before turning hawkish at its April policy meeting. The recent spike in oil has boosted speculation the rate-setting panel will raise rates at its June 6 meeting.
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